Written by: Dr. David Kelly
As forecast for the unemployment rate. It is worth noting, however, that the expected, the Federal Reserve raised its target for the federal funds rate to a range of 1.75%-2.00% today. Both the language in its statement and its economic projections were more hawkish than in its May and March meetings respectively. However, markets should have fully anticipated this based on incoming data. In particular:
- In its statement, the Federal Open Market Committee (FOMC) upgraded its assessment of both economic growth and the jobs market. This reflects the reality that incoming data are pointing to 2nd quarter real GDP growth of close to 4% and that the unemployment rate has fallen to its lowest level since December 1969.
- In its economic projections, the FOMC bowed to reality, slightly raising its economic growth and inflation forecasts and cutting its e Fed maintained its forecast of long-term sustainable growth of 1.8% and that none of the 15 Fed governors or regional bank presidents projected a long-term real GDP growth rate outside of a range of 1.7% to 2.1%.
- In its interest rate projections, the FOMC upgraded the anticipated number of future rate hikes from three to four in 2018 and maintained their March estimate for three rate hikes in 2019, reflecting a hawkish bias.
EXHIBIT 1: FOMC JUNE 2018 FORECASTS*
Source: Federal Reserve, J.P. Morgan Asset Management. Data as of June 13, 2018.
*Forecasts of 15 FOMC participations, median estimate.
** Green denotes an adjustment higher, red denotes an adjustment lower.
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Important information: The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.
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